Median net worth in US by age

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dyangu
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Median net worth in US by age

Post by dyangu » Tue Nov 08, 2011 8:12 pm

The data from PewResearch is rather depressing. The net worth gap between young and old is 47 times, the widest ever recorded. A net worth of $170,494 for a household headed by a retiree is not an enviable position, but $3,662 for a young household isn't even enough for a medical emergency. Americans are much poorer than I thought.
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10106106
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Re: Median net worth in US by age

Post by 10106106 » Tue Nov 08, 2011 8:43 pm

Does that include retirement accounts and home value?

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Opponent Process
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Re: Median net worth in US by age

Post by Opponent Process » Tue Nov 08, 2011 8:51 pm

10106106 wrote:Does that include retirement accounts and home value?
good question. from the report:
"Household wealth is the sum of all assets (house, car, savings account, 401(k) account, etc.) minus the sum of all debts (home mortgages, car loan, student loan, credit card debt, etc.) of everyone living in the household."
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Re: Median net worth in US by age

Post by Alan S. » Tue Nov 08, 2011 9:22 pm

Perhaps a small piece of this can be attributed to the fact that those age 65+ were raised by parents who lived through the great depression and were forever molded by that experience. Through their adult life, many of them tended to be savers rather than spenders and they avoided compiling large debts. The education system is the 50s and 60s may also have been comparatively superior to later periods.

While growing their net worth in their working prime, the 401k was launched and the 90s provided a huge bull market to boost their plan balances along with other taxable savings, and real estate was booming for much of this period.

Therefore, a combination of upbringing and fortunate timing of retirement products and market performance.

Meanwhile, those under 35 have experienced the opposite of most of the above factors.

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Re: Median net worth in US by age

Post by Fallible » Tue Nov 08, 2011 9:23 pm

The numbers for the younger groups is really surprising. Would the 65 and over net worth include pensions or Social Security?
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Re: Median net worth in US by age

Post by Nestegg_User » Wed Nov 09, 2011 9:15 am

Opponent Process wrote:
10106106 wrote:Does that include retirement accounts and home value?
"Household wealth is the sum of all assets (house, car, savings account, 401(k) account, etc.) minus the sum of all debts (home mortgages, car loan, :( :( STUDENT LOANS :( :( , credit card debt, etc.) of everyone living in the household."

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Re: Median net worth in US by age

Post by RenoJay » Wed Nov 09, 2011 9:26 am

I had read an article about this study that implied the main difference is that the older households purchased their homes before the housing boom/bust [edited by Mel to correct typo which made it appear political] and still have equity, whereas the younger household tended to purchase their homes at bubble-era prices and have negative home equity. Obviously student loans, etc. can play a big part, but this explanation made sense to me.

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Re: Median net worth in US by age

Post by Rick Ferri » Wed Nov 09, 2011 9:43 am

I visited a national park last week. An $80 pass will get people under the age of 62 into the park for one year. However, seniors age 62 and older can get a LIFETIME pass for only $10. Governments, including the federal government, routinely give people in their 6os and older breaks on income taxes, sales taxes, entrance fees, and other government subsidies. Why does our society believe that people who in their 60s and older are destitute?

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Re: Median net worth in US by age

Post by Howie » Wed Nov 09, 2011 10:28 am

Fallible wrote:The numbers for the younger groups is really surprising. Would the 65 and over net worth include pensions or Social Security?
How would this be comprehended in terms of one's net worth? An NPV for these sources of income?

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Re: Median net worth in US by age

Post by letsgobobby » Wed Nov 09, 2011 10:34 am

Rick Ferri wrote:I visited a national park last week. An $80 pass will get people under the age of 62 into the park for one year. However, seniors age 62 and older can get a LIFETIME pass for only $10. Governments, including the federal government, routinely give people in their 6os and older breaks on income taxes, sales taxes, entrance fees, and other government subsidies. Why does our society believe that people who in their 60s and older are destitute?

Rick Ferri
Rick, prior to Social Security, the elderly had the highest rate of poverty of any age group. My, how the times have changed. But one cannot say more without talking politics.

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Re: Median net worth in US by age

Post by jh » Wed Nov 09, 2011 10:40 am

.....
Last edited by jh on Fri May 04, 2012 10:41 pm, edited 1 time in total.

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Re: Median net worth in US by age

Post by hsv_climber » Wed Nov 09, 2011 10:45 am

My explanation is not political (hopefully :wink: ).

We have built a society where most resources are going to the top of the pyramid, i.e. CEO / pro NFL players / celebrities / etc. are receiving disproportionate amounts of resources in comparison to everyone else.
Well, the same apply to seniors. They are just on the top of the age pyramid ( you can also call it "the light at the end of the tunnel") where more resources are going.

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Re: Median net worth in US by age

Post by hsv_climber » Wed Nov 09, 2011 10:46 am

jh wrote:I would imagine that there has been a lot of inflation over those 25 years. So, I don't think anyone is doing well on that chart.
Chart is inflation - adjusted...

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Re: Median net worth in US by age

Post by greg24 » Wed Nov 09, 2011 10:50 am

Old people save money.

Young people spend it.

That hasn't changed.

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Re: Median net worth in US by age

Post by Imperabo » Wed Nov 09, 2011 11:05 am

greg24 wrote:Old people save money.

Young people spend it.

That hasn't changed.
Young people also invest in themselves to increase their future earning potential, often borrowing money to do it.

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Re: Median net worth in US by age

Post by staythecourse » Wed Nov 09, 2011 11:22 am

RenoJay wrote:I had read an article about this study that implied the main difference is that the older households purchased their homes before the housing boom/bush and still have equity, whereas the younger household tended to purchase their homes at bubble-era prices and have negative home equity. Obviously student loans, etc. can play a big part, but this explanation made sense to me.
BINGO!! No offense to the older generations, but they had it as easy as you could have ever asked for. They lived through the greatest stock market bull run, greatest bond market bull run, AND the greatest housing market run all in the last 30 years. The younger generations bought houses much overvalued AND record setting student debt AND an economy now that is making it tough for the youth to even start a job.

This is not even taking into account older generations are accessing SS and DB plans that many youngsters don't get.

Now the youngster generation makes it MUCH worse with their constant leveraging with credit debt.

Taking all that into account I'm only surprised the gap isn't bigger!!

Good luck.
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Re: Median net worth in US by age

Post by bertilak » Wed Nov 09, 2011 11:27 am

Another cause of the disparity is not so negative. It shows that people accumulate wealth as they get older. This is a good thing.

This is not to say many of the previous points are wrong, just that there is more to it. If older people did NOT have more wealth THAT would be pretty depressing.
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Re: Median net worth in US by age

Post by JimInIllinois » Wed Nov 09, 2011 11:35 am

How much of the change in seniors' assets is due to the fact that people are increasingly likely to have defined-contribution retirement plans (included in assets) rather than pensions (not included in assets)? I never even saw this mentioned.

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Re: Median net worth in US by age

Post by PreserveCapital » Wed Nov 09, 2011 11:35 am

Rick Ferri wrote:I visited a national park last week. An $80 pass will get people under the age of 62 into the park for one year. However, seniors age 62 and older can get a LIFETIME pass for only $10. Governments, including the federal government, routinely give people in their 6os and older breaks on income taxes, sales taxes, entrance fees, and other government subsidies. Why does our society believe that people who in their 60s and older are destitute?

Rick Ferri

Rick--assuming the management of the park might be rational (big assumption, I know), it may also have something to do with anticipated utilization rate.

A 20 or 30 or even 40 something might be expected to get a lot of use out of a lifetime pass--and use those park facilities HARD! Lots of hiking/biking/whatever outdoorsy things you are allowed to do on a park, the younger cohort will probably make the most use of it.

A person in their sixties and up might not make near as much use of the facilities either by frequency of visit; duration of visit; or park resources used while visiting.

Also, grandma or grandpa might likely not go at all if the cost was much more. And maybe this is partially aimed at grandma and grandpa who might be ride-alongs with their adult children and grandchildren. Someone's got to buy the souvenirs.

So maybe there is some degree of economic rationality to this kind of preference.

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Re: Median net worth in US by age

Post by SHL » Wed Nov 09, 2011 11:39 am

Americans aren't so much poor as they are poor savers.
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Re: Median net worth in US by age

Post by lightheir » Wed Nov 09, 2011 12:00 pm

Opponent Process wrote:
10106106 wrote:Does that include retirement accounts and home value?
good question. from the report:
"Household wealth is the sum of all assets (house, car, savings account, 401(k) account, etc.) minus the sum of all debts (home mortgages, car loan, student loan, credit card debt, etc.) of everyone living in the household."
I think this statement is the real cause of why the graph looks so skewed in favor of the elders.

Younger folks in their 30s-40s often have just taken out a 15 or even 30 year mortgage for a house. If you include that debt as part of their net worth, it has the biggest numerical impact on net worth at the start of the mortgage - big enough to wipe out most folks' alleged net worth in that bracket. So that graph will most likely overestimate how poor the younger folks are, because of the home mortgages, many of which went south in 2008.

The retirees got the benefit of the biggest stock market boom in history for 15 years, and if they readjusted as per risk for their age, hopefully they moved into more conservative investments before the recent big stock market downturn. THey also benefited from a huge real estate runup as well, and may have sold before the downturn. Heck, even with the real estate downturn, my parents have made out like bandits on their house which took a 20% hit at its worst point.

Us young folks have had no stock boom for the past 7 years and no net real estate appreciation over that same period. So it's not surprising to me that the stats are skewed in favor of the elders right now.

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Re: Median net worth in US by age

Post by JimInIllinois » Wed Nov 09, 2011 12:09 pm

lightheir wrote:
Opponent Process wrote:
10106106 wrote:Does that include retirement accounts and home value?
good question. from the report:
"Household wealth is the sum of all assets (house, car, savings account, 401(k) account, etc.) minus the sum of all debts (home mortgages, car loan, student loan, credit card debt, etc.) of everyone living in the household."
I think this statement is the real cause of why the graph looks so skewed in favor of the elders.

Younger folks in their 30s-40s often have just taken out a 15 or even 30 year mortgage for a house. If you include that debt as part of their net worth, it has the biggest numerical impact on net worth at the start of the mortgage - big enough to wipe out most folks' alleged net worth in that bracket. So that graph will most likely overestimate how poor the younger folks are, because of the home mortgages, many of which went south in 2008.
But you include the value of the house in their assets, so the immediate impact of buying a house should be zero (except for the massive transaction costs). Student loans, on the other hand, show up as a pure negative because your personal human capital isn't counted as an asset.

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Re: Median net worth in US by age

Post by bertilak » Wed Nov 09, 2011 12:21 pm

JimInIllinois wrote:Student loans, on the other hand, show up as a pure negative because your personal human capital isn't counted as an asset.
I think many recent graduates are realizing (or soon will be realizing) that they didn't get much human capital for their money.
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Re: Median net worth in US by age

Post by rokidtoo » Wed Nov 09, 2011 12:55 pm

I'd rather be young with plenty of human capital and 30-40 years to generate wealth than old with $170K in net worth. For a Boglehead, $170K only generates $6.8K annual income at 4%. Plus Social Security and you're in fat city. :sharebeer -----Jim

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Re: Median net worth in US by age

Post by lightheir » Wed Nov 09, 2011 12:56 pm

rokidtoo wrote:I'd rather be young with plenty of human capital and 30-40 years to generate wealth than old with $170K in net worth. For a Boglehead, $170K only generates $6.8K annual income at 4%. Plus Social Security and you're in fat city. :sharebeer -----Jim
I think most senior folks in their 70s+ wouldn't mind just being young, period, regardless of debt. :wink:

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Re: Median net worth in US by age

Post by goggles » Wed Nov 09, 2011 1:06 pm

This is flat-out terrifying. The US is in big, big trouble.

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Re: Median net worth in US by age

Post by rokidtoo » Wed Nov 09, 2011 1:23 pm

lightheir wrote:I think most senior folks in their 70s+ wouldn't mind just being young, period, regardless of debt. :wink:
YES, my point, exactly!!! 8-) ----Jim

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Re: Median net worth in US by age

Post by bertilak » Wed Nov 09, 2011 1:27 pm

rokidtoo wrote:I'd rather be young with plenty of human capital and 30-40 years to generate wealth than old with $170K in net worth.
Wealth generation is the big lesson here.
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Re: Median net worth in US by age

Post by rokidtoo » Wed Nov 09, 2011 2:01 pm

The attached shows that an individual's the peak earning years are 45-54 with a median personal income of approximately $65K. Seniors, 65 and older, have a median personal income of $18K - which includes any income generation from accumulated net worth. Therefore seniors, to use a 1940s cliche, are not exactly "living the life of Riley".-----Jim

http://hmprg.org/wp-content/uploads/201 ... linois.pdf

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Re: Median net worth in US by age

Post by yobria » Wed Nov 09, 2011 2:17 pm

Doesn't include the big one - human capital. That one tends to even things out. :)

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Re: Median net worth in US by age

Post by NateH » Wed Nov 09, 2011 2:34 pm

quote from the study:
" If it had not been for home equity, the median net worth of older American households in 2009 would have been 33% lower than that of older households in 1984, instead of 42% higher. For young households, there is no such difference: Median net worth in 2009 would be 66% lower than their counterparts in 1984 if home equity is excluded, compared with 68% lower if equity is included."

this is essentially a story about timing the housing purchases of various age groups. For the majority of all americans, their home is their largest asset, but lumping all other assets into the Pew calculation doesn't help anyone understand the "trend".

Did we really need a big study to tell us that young people have lost paper value on their homes?
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Re: Median net worth in US by age

Post by dsmil » Wed Nov 09, 2011 2:46 pm

The decrease in net worth for young people must be student loans. For people who studied something useful in college and got a good job, their net worth is probably lower than average in their low 20's but will then increase because of earning potential....at least that's what I'm telling myself! $50k in the red and proud of it!

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Re: Median net worth in US by age

Post by swaption » Wed Nov 09, 2011 3:27 pm

My observations on this are as follows:

- Totally disingenuous use of statistics by the press in connection with this. Widely reported that the net worth of those 65+ is 47 times the level of those under 35, while the level 25 years ago was 10 times. The $3,662 number is so low that it makes such a ratio meaningless. For example, if that number was $1,000, it would be 170 times. As it is the prior level was $11,521, low no matter how you slice it.

- Generational differences in pensions vs. 401K accounts. Simply put, 25 years ago pensions were a much larger portion of retirement saving, but this was not included in net worth calculations. Today 401K accounts are included and this is undoubtedly meaningful for older persons.

- What can be done about this, very simple, just wait 25 years. If things are so bad for the younger generation, then we can now look forward to the day when this all reveses itself :wink:

- Any attempt to draw conclusions from this in terms of whether resources are inordinately allocated to the old is misguided. Sure, there are problems with municipal and teacher pensions, medicare, social security, etc., but using junk statistics like this does nothing to further the dialogue. It just gives fodder for all populist politians that need material to further polarize the issues.

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Re: Median net worth in US by age

Post by Alan S. » Wed Nov 09, 2011 4:37 pm

I wonder if the present value of those nice DB pensions were added in to those figures 3 decades ago. Many seniors today with 6 figure retirement accounts being hammered by the markets would trade it for a nice PBGC insured DB pension with 50% for surviving spouse.

And if the senior group holds all this disproportionate net worth, their longer life expectancy means that the next generation inherits this wealth at an older age than the 80's version of that generation.

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Re: Median net worth in US by age

Post by c.Alvin » Wed Nov 09, 2011 4:46 pm

No Surprise.

The under 35 group includes all those young twenty somethings that are busy experiencing life - saving is an after thought. Between the monthly apartment rent, auto loan, and automobile insurance there is not much left. What is left goes for electronic gadgets and eating out. Average person in the U.S. does not have real assets until the idea of purchasing a house takes hold.

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Re: Median net worth in US by age

Post by Hector » Wed Nov 09, 2011 5:00 pm

Its not surprising considering negative home equity and enormous student loans. I think these two are major factors behind reduction in net worth for younger people. Housing prices saw one of the steepest decline recently and educational bubble has grower the biggest ever.

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Re: Median net worth in US by age

Post by rob » Wed Nov 09, 2011 6:09 pm

lightheir wrote:I think most senior folks in their 70s+ wouldn't mind just being young, period, regardless of debt. :wink:
I am 40's and I would for sure.... no need to wait till I'm 70... Where do I line up??

To the home point... that would cover people from say 30's and makes sense that as you pay off house NW increases but not sure about the younger band.... student loans is PART of it and credit cards are part of it.... but there is more to it then that and part of what is left would be politics.
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Re: Median net worth in US by age

Post by chaz » Wed Nov 09, 2011 6:18 pm

The over 65 group has really improved. Good news.
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Re: Median net worth in US by age

Post by jheez » Wed Nov 09, 2011 7:05 pm

Another interesting statistic is how large the poverty rate has grown for the under 35 crowd. It's just about twice as high as the over 65 crowd, most of who don't/can't work. Kind of depressing.

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Re: Median net worth in US by age

Post by Karamatsu » Wed Nov 09, 2011 7:16 pm

Yes, I find even more disturbing,
Image
especially coming on the heels of the much more comprehensive US Census Bureau report that the number of Americans living in poverty (15.1% = 46 million people) is the worst since 1993. It seems to correlate well with the spike seen in the Pew graph. Taking the two together it seems that, with their income sources cut, young families aren't likely to recover meaningful net worth any time soon. And of course, the statistics are even worse for minorities. More than 1 in 4 African-Americans and Hispanics are living below the poverty line. I imagine there are a lot of people out there with no net financial assets at all. Fortunately there are more important things in life, but the situation does make for hard times.

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Re: Median net worth in US by age

Post by Rick Ferri » Thu Nov 10, 2011 10:01 am

Just remember that poverty in the US is measured by American standards, not global standards. Poverty in the US is wealth to more than 4 billion people worldwide. This is why we have an immigration problem. I'm not being mean, this is a fact.

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Re: Median net worth in US by age

Post by greg24 » Thu Nov 10, 2011 11:22 am

There are Americans living in poverty today that have a much nicer life than the richest people of 200 years ago. Maybe even 100 years ago.

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Re: Median net worth in US by age

Post by steadyeddy » Thu Nov 10, 2011 12:01 pm

Karamatsu wrote:Yes, I find even more disturbing,
Image
especially coming on the heels of the much more comprehensive US Census Bureau report that the number of Americans living in poverty (15.1% = 46 million people) is the worst since 1993. It seems to correlate well with the spike seen in the Pew graph. Taking the two together it seems that, with their income sources cut, young families aren't likely to recover meaningful net worth any time soon. And of course, the statistics are even worse for minorities. More than 1 in 4 African-Americans and Hispanics are living below the poverty line. I imagine there are a lot of people out there with no net financial assets at all. Fortunately there are more important things in life, but the situation does make for hard times.
Yes, but statistically the largest populations still having kids in America are non-white immigrants. One should expect a higher rate of poverty among the young when the impoverished are the ones having kids. With any luck they'll all grow up to produce and accumulate wealth, but they have no generational wealth to speak of.

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Re: Median net worth in US by age

Post by NateH » Thu Nov 10, 2011 12:06 pm

Karamatsu wrote:Yes, I find even more disturbing,
Image
especially coming on the heels of the much more comprehensive US Census Bureau report that the number of Americans living in poverty (15.1% = 46 million people) is the worst since 1993. It seems to correlate well with the spike seen in the Pew graph. Taking the two together it seems that, with their income sources cut, young families aren't likely to recover meaningful net worth any time soon. And of course, the statistics are even worse for minorities. More than 1 in 4 African-Americans and Hispanics are living below the poverty line. I imagine there are a lot of people out there with no net financial assets at all. Fortunately there are more important things in life, but the situation does make for hard times.
hasn't the definition of "poverty" changed a number of times since 1967? As we can see from the the report you reference, they are ready to change it again, resulting in instananeously higher "poverty".

I find little in this PEW study of value. the statistics reported certainly have a spin to them.
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Re: Median net worth in US by age

Post by soaring » Thu Nov 10, 2011 12:17 pm

rokidtoo wrote:
lightheir wrote:I think most senior folks in their 70s+ wouldn't mind just being young, period, regardless of debt. :wink:
YES, my point, exactly!!! 8-) ----Jim
Be young again in this day and age or young again in the 50's? I'll take young again in the 50's sure but without doubt not interested in young again in today's era. No thanks.
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Re: Median net worth in US by age

Post by Karamatsu » Thu Nov 10, 2011 8:45 pm

It's funny what people react to sometimes. No matter how the measure differs country-to-country, or how that compares to global averages, I imagine we can all agree that increasing numbers of people living in poverty in the country where we happen live is, on balance, undesirable. Even supply-siders need someone to buy their products, unless of course they make their salaries and bonuses solely through government subsidies and bailouts. Here is Census Bureau report. There are, of course, many other kinds of poverty, and many reasons why people emigrate to (or for that matter, leave) the US, but we're tip-toeing on the edge of politics.

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Re: Median net worth in US by age

Post by rustymutt » Thu Nov 10, 2011 8:58 pm

Rick Ferri wrote:I visited a national park last week. An $80 pass will get people under the age of 62 into the park for one year. However, seniors age 62 and older can get a LIFETIME pass for only $10. Governments, including the federal government, routinely give people in their 6os and older breaks on income taxes, sales taxes, entrance fees, and other government subsidies. Why does our society believe that people who in their 60s and older are destitute?

Rick Ferri
I believe the rules were enacted to show respect for older Americans, rather than the fact they might be an
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Re: Median net worth in US by age

Post by zaboomafoozarg » Thu Nov 10, 2011 9:29 pm

soaring wrote:Be young again in this day and age or young again in the 50's? I'll take young again in the 50's sure but without doubt not interested in young again in today's era. No thanks.
No internet? No thanks :lol

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bertilak
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Re: Median net worth in US by age

Post by bertilak » Thu Nov 10, 2011 9:36 pm

zaboomafoozarg wrote:
soaring wrote:Be young again in this day and age or young again in the 50's? I'll take young again in the 50's sure but without doubt not interested in young again in today's era. No thanks.
No internet? No thanks :lol
We didn't seem to need it in those days.
May neither drought nor rain nor blizzard disturb the joy juice in your gizzard. -- Squire Omar Barker (aka S.O.B.), the Cowboy Poet

bh
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Re: Median net worth in US by age

Post by bh » Thu Nov 10, 2011 9:43 pm

i would think that 2 big factors in the financial comfort of older versus younger are:
a) home equity values - - - older have in many cases been in paid off homes for yrs and can direct funds to savings that the young need for housing costs
b) inheritances - - - older are more likely to have already received such

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